2017 opened with a much brighter outlook for the petroleum industry and the future for America’s energy security than did 2016.
At year-end 2015 the U.S. oil industry was in a funk. In the last seven months of 2015, oil prices declined 38 percent, from more than $60 per barrel in June to $37 by the end of December. During the year, the U.S. active rig count declined 61 percent, from 1,811 to 698, as contractors withdrew many of their rigs from service, stacked them in service yards, and released thousands of workers who had been required for drilling and completion operations.
Vocal public demonstrations against fracing were more frequent and strident. The practice of fracing was being charged for many alleged offences, including earthquakes, use of poisonous substances in frac fluids, and pollution of groundwater resources. Demonstrations were often actively initiated and/or supported by politicians, TV personalities, Hollywood starlets, press pundits and other public figures. Several communities and states passed laws restricting or banning fracing outright. Among those in the industry there was concern that without the ability to employ fracing, U.S. oil production would begin a rapid decline that would put it back on the downward slope that had existed in the U.S. from 1985 to 2006, before America’s Shale Revolution got underway.
Significantly, within the industry, an oppressive sense of angst was prevalent, as the EPA and other government agencies continued to expand and enforce policies of an anti-industry administration. Many wondered if a national “frac-ban” would be pursued which, if enacted, would likely end the Shale Revolution in the U.S., and with it, the opportunity to drill for and produce more than 95 percent of our nation’s proven petroleum reserves.
Looking back to 2005, there had been widespread concern that the U.S. was “running out of oil,” and the U.S. faced the unpleasant probability that it would need to continue increasing oil and natural gas imports required to fuel our vehicles and sustain our economy.
2017 opened to a very different scene. Oil prices had risen during 2016, closing the year at $53.72 per barrel. Most of the wells being drilled in the U.S. are in “resource plays”: oil shale or tight sandstone reservoirs that are expensive to drill and complete, and generally require oil prices above $50 per barrel to be economic. Some stacked rigs were now being put back into service.
Amazingly, during 2016 several of the largest oil fields ever discovered in the U.S. were announced. In August, Apache announced its discovery of the Alpine High field in Reeves County, Texas. The U.S. Geological Survey estimates that it could contain the equivalent of 20 billion barrels of oil, in an area largely written off as low-potential by previous workers.
In September, Armstrong Oil of Denver and the Spanish company Repsol announced that an often-overlooked rock formation on Alaska’s North Slope may hold a 120,000 barrels per day secret. Experts say it could be one of the largest oil discoveries in Alaska, holding upwards of three billion barrels of oil.
Then, in November, Caelus Energy, a privately owned and financed company in Dallas, announced its most recent discovery in Smith Bay on Alaska’s North Slope. Located about 60 miles southeast of Barrow and 160 miles west-northwest of Prudhoe Bay and the Trans-Alaska Pipeline, preliminary evaluation of the field indicates possible recovery of 2.4 billion barrels of oil. Caelus believes that the expanded area may contain upwards of 10 billion barrels of oil.
These new discoveries point to what experts say is a shifting reality for American energy producers … one in which deeply ingrained worries about a dwindling oil supply have become almost moot. “We will never run out of oil,” said Bernard Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University.